White Collar Crime/Criminal Defense Briefing
January 2007
Authors:
Mark Rush
+1.412.355.8333
mark.rush@klgates.com
Michael D. Ricciuti
+1.617.951.9094
michael.ricciuti@klgates.com
www.klgates.com
White Collar and Corporate Prosecution After the
McNulty Memorandum: An Overview with
Comments and Insights by Former United States
Attorney General Dick Thornburgh and Former
ABA President Michael S. Greco1
Brian F. Saulnier
+1.412.355.6504
brian.saulnier@klgates.com
Introduction
K&L Gates comprises approximately
1,400 lawyers in 22 offices located in North
America, Europe and Asia, and represents
capital markets participants, entrepreneurs,
growth and middle market companies,
leading FORTUNE 100 and FTSE 100
global corporations and public sector
entities. For more information, please visit
www.klgates.com.
Federal prosecutors are guided in pursuing prosecutions of corporations and their employees
with what the Department of Justice (“the Department”) calls the “Principles of Federal
Prosecution of Business Organizations” (“the Principles”). In 2003, then-Deputy Attorney
General Larry Thompson issued a revision of the Principles, called the “Thompson
Memorandum.” The Thompson Memorandum’s focus was to “increase emphasis on and
the scrutiny of the authenticity of a corporation’s cooperation.” Unfortunately, it regrettably
became clear that under the Thompson Memorandum, federal prosecutors routinely coerced
companies to waive protections afforded by the attorney-client privilege and the work
product doctrine in exchange for cooperation credit so as to avoid or mitigate charges for the
illegal acts of employees. Waivers were not always given “voluntarily,” as the Department
would suggest; rather, encouraged by the Thompson Memorandum, federal prosecutors have
aggressively pressured companies to waive the attorney-client privilege and work product
doctrine protections attaching to internal investigations and other materials generated by
or at the request of corporate counsel.
Perhaps recognizing the chorus of criticism in Congress and in the legal community arising
from these forced waivers, Deputy Attorney General Paul McNulty issued on December 12,
2006 a further revision of the Principles, called the “McNulty Memorandum.”2 Recognizing
that “[m]any of those associated with the corporate legal community have expressed concern
that our practices may be discouraging full and candid communications between corporate
employees and legal counsel …[which] was never the intention of the Department,” the
McNulty Memorandum changes the practice by which federal prosecutors may seek waivers
of the attorney-client privilege and work product doctrine protection from companies
involved in corporate criminal investigations. It does not, however, prohibit prosecutors
from seeking such waivers.
We believe this is wrong. Prosecutorial pressure to waive these protections erodes bedrock
principles of the American criminal justice system. By putting the confidentiality of
1 Dick Thornburgh is Of Counsel to K&L Gates. He served as Attorney General of the United States under two
presidents, as the highest-ranking American at the United Nations, and as Governor of Pennsylvania. Michael S.
Greco is a Partner at K&L Gates. He is Immediate Past President of the American Bar Association and a business
litigator for the past 35 years. Messrs. Thornburgh and Greco are leading voices advocating protection of the
attorney-client privilege and have called for the revocation of the Justice Department’s waiver policy under the
Thompson (and now McNulty) Memorandum.
2 This new guidance supersedes and replaces previous guidance contained in Deputy Attorney General Larry
Thompson’s January 20, 2003 Principles of Federal Prosecution of Business Organizations Memorandum
(the “Thompson Memorandum”) and in Acting Deputy Attorney General Robert D. McCallum, Jr.’s October
21, 2005 Waiver of Corporate Attorney-Client and Work Product Protections Memorandum (the “McCallum
Memorandum”).
u:\DTP\INDD\MKTG\Update-McNulty
Briefing.
White Collar Crime/Criminal Defense Briefing
attorney-client communications in doubt, consultation
with counsel is discouraged and corporate compliance
programs are undermined, as internal investigations
designed to detect and remedy employee misconduct
are increasingly exposed to government scrutiny. This,
of course, is not what the Department states it is seeking
through the Thompson and McNulty Memoranda. For
Deputy Attorney General McNulty and the Department
to truly encourage corporate leaders to take action to
protect shareholders, preserve corporate value, and
promote honesty and fair dealing with the investing
public, then the Department should revoke its waiver
policy—as the United States Sentencing Commission
prudently and unanimously did on April 6, 2006 in
revising the Sentencing Guidelines on corporate
cooperation—because it is antagonistic to each of
those goals.
Moreover, the resulting and corrosive “culture of
waiver” which the Department has been fostering
in federal criminal investigations and prosecutions
based on the Thompson and McNulty Memoranda
does violence to the constitutional and legal rights of
investigated employees.3 Indeed, under the Thompson
Memorandum, federal prosecutors denied cooperation
credit to companies that advanced or paid an employee’s
legal fees, that participated in a joint defense with an
employee, or that did not fire or sanction employees
who exercised the Fifth Amendment right against selfincrimination. Even though the McNulty Memorandum
purports to make changes in some of these practices,
any tactic under which the Department pressures
companies to treat employees as culpable before guilt
has been established stands in violation of the principle
that a citizen is presumed innocent unless and until
proven guilty. Such pressure may also interfere with
an investigated employee’s Sixth Amendment right to
counsel.
While important as an admission that the Thompson
Memorandum created serious problems, the McNulty
Memorandum fails to fix those problems. In fact, the
McNulty Memorandum does not revoke any of the
Thompson Memorandum’s corrosive provisions and
does little—if anything—to restore faith and certainty
that privileged attorney-client communications and
attorney work product will remain confidential when
the government comes knocking. Instead, the McNulty
Memorandum’s “new” guidance for seeking a waiver
3 This approach has also been taken by the SEC and, indeed, across
the spectrum of law enforcement officials nationwide.
—the creation of a system of internal review of such
requests by the Department—merely creates an
unregulated, unenforceable and undefined procedure
whereby a prosecutor’s waiver request must be ratified
by persons at a higher level within in the Department
—persons who share the view that the waiver policy
is an important tool for government investigations.
Consequently, employees and company counsel will
not be able to predict with any reasonable degree of
certainty whether these fundamental protections will be
maintained. This result should be unacceptable to those
working within the American criminal justice system.
Indeed, the United States Supreme Court warned
against this very problem in its seminal Upjohn Co. v.
United States decision:
[I]f the purpose of the attorney-client privilege
is to be served, the attorney and client must be
able to predict with some degree of certainty
whether particular discussions will be protected.
An uncertain privilege … is little better than no
privilege at all.
449 U.S. 383, 393 (1981).
New uncertainties introduced by the complicated set
of procedures for review and approval contained in
the McNulty Memorandum will make this manifest.
Thornburgh, Greco and other K&L Gates lawyers
will continue to advocate for revocation of the waiver
policy embodied in the Thompson and McNulty
Memoranda.
Impetus for the McNulty Memorandum: Erosion of
the Right to Confidential Consultation with Counsel or
Preemptive Strike?
When introducing the McNulty Memorandum, Deputy
Attorney General McNulty stated that his memorandum
“clarifies the intent of the Thompson Memorandum in
connection with how prosecutors evaluate a company’s
cooperation in making their charging decisions.” It
appears to be both more and less than that.
The McNulty Memorandum was released in the wake
of mounting criticism that the Thompson Memorandum
enabled federal prosecutors to ride roughshod over
protections historically provided to corporations, their
employees and their counsel, and engendered a climate
of fear in which corporate defendants felt pressured
to waive attorney-client privilege and work product
doctrine protections when faced with the threat of
federal prosecution.
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White Collar Crime/Criminal Defense Briefing
K&L Gates partner Michael S. Greco, then-President
of the American Bar Association, wrote to Attorney
General Alberto Gonzales on two occasions in
early 2006 to reiterate to the Department the ABA’s
strong policy of protecting the privilege, opposing
the Department’s coerced waiver policy, and urging
revocation of the policy. In his response dated July 18,
2006, Attorney General Gonzalez informed Mr. Greco
and the ABA that the Department intended to make
no changes to its policy. In an interview published
in the January 2007 issue of Metropolitan Corporate
Counsel,4 Mr. Greco urged immediate revocation of
the waiver policy through the Department’s voluntarily
changing its policy or, if necessary, by Congressional
action requiring such a change.
Former U.S. Attorney General and K&L Gates Of
Counsel Dick Thornburgh has been a leading voice
critical of the Thompson Memorandum and the ensuing
“culture of waiver.” The New York Times recently
noted his influence in seeking to have the Thompson
Memorandum revoked or revised.5 As part of this
effort, Mr. Thornburgh recently authored a monograph
for the Washington Legal Foundation exploring this
topic,6 and has stressed the need to protect the privilege
as part of the public interest in promoting both a lawabiding and a flourishing commercial society.
The chorus of concerned voices calling for change—
comprised of an extraordinary coalition including the
ACLU, the U.S. Chamber of Commerce, the American
Bar Association, the National Association of Criminal
Defense Lawyers, and United States District Court
Judge Lewis Kaplan, 7 among others — reached a
4 Michael S. Greco, DOJ’s Past Policies Undermined Corporate
Compliance Efforts; The McNulty Memo is Not the Solution,
Metropolitan Corporate Counsel, January 2007.
5 Lynnley Browning, Judge’s Rebuke Prompts New Rules for
Prosecutors, N.Y. Times, Dec. 16, 2006, at C4.
6 Dick Thornburgh, Waiver of the Attorney-Client Privilege: A
Balanced Approach, Washington Legal Foundation Monograph (July
2006).
7 In Judge Lewis Kaplan’s two decisions in the corporate fraud
investigation of tax shelters created by accounting giant KPMG,
United States v. Stein, provisions of the Thompson Memorandum
were found to be unconstitutional. In Stein I, Judge Kaplan held
that the provisions of the Thompson Memorandum concerning the
advancement of legal fees to employees by corporate employers
violated the Fifth and Sixth Amendment rights of the defendant
employees in the case because the government had used the
Thompson Memorandum to exert undue pressure on KPMG to
cut off the payment of legal fees to the defendant employees upon
indictment. 435 F. Supp. 2d 330 (S.D.N.Y. 2006). In Stein II,
Judge Kaplan granted motions to suppress pre-indictment “proffer
statements” made by two defendants in interviews with prosecutors
crescendo on September 12, 2006 during the Senate
Judiciary Committee’s hearing on “The Thompson
Memorandum’s Effect on the Right to Counsel in
Corporate Investigations.” Senator Patrick Leahy
(D-VT.), ranking member of that committee,
summarized the call for change:
A growing number of critics of the Thompson
Memorandum—including former Republican
Attorneys General—have expressed concern that
the Department’s policy is too heavy handed and
that the policy has created a dangerous ‘culture
of waiver’ in our criminal justice system. … The
serious legal and constitutional concerns raised
by the Department’s policy have far reaching
implications. Erosion of the right to counsel
undermines the fairness of our criminal justice
system for all Americans.
Deputy Attorney General McNulty, then defending the
Thompson Memorandum, took a different view when
testifying before the Senate Judiciary Committee:
The Thompson Memo is a set of principles, the
basic structure of which is used every day in the
criminal justice system. … The time may come
when revisions are needed to this policy and I
will gladly make them when I am convinced
they are necessary and in the public interest.
In the meantime, I support our prosecutors in
their charging decisions and their use of [the
Thompson Memorandum] guidelines. The
guidance is consistent with long-standing
charging practices and is fair to corporations
under investigation and to the current and former
officers and employees. I believe the Thompson
Memorandum strikes an effective balance
between the interests of the business community
and the investing public.
Whether Deputy Attorney General McNulty issued
the McNulty Memorandum to preempt likely
Congressional action is known only to the Department.
It appears, however, to be more than a coincidence
that on December 7, 2006—only five days before
the release of the McNulty Memorandum—Senator
Arlen Specter (R-Pa.) introduced a bill entitled the
“Attorney-Client Privilege Protection Act of 2006” (the
on the ground that the statements had been coerced, in violation of
the Fifth Amendment privilege against self-incrimination, because
the government had pressured KPMG to condition the payment of
the individuals’ legal fees during the investigation on their agreement
to submit to such interviews. 2006 WL 2060430 (S.D.N.Y. July 26,
2006).
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White Collar Crime/Criminal Defense Briefing
“Act”). The Act seeks to prohibit federal prosecutors
from: (a) demanding or requesting that a corporation
waive its attorney-client privilege or attorney work
product protections or conditioning favorable treatment
based on such waiver; or (b) conditioning any charging
decision or determination of cooperation on whether
the corporation (i) waives the attorney-client privilege
or work product doctrine, (ii) provides counsel to or
contributes to the legal defense fees of employees, or
(iii) enters into a joint defense or similar agreement. The
Act does not preclude a truly voluntary disclosure.
The Act contemplates real protections for a target
corporation and investigated employees with regard
to preservation of the attorney-client privilege and
work product doctrine protections that go well beyond
the changes wrought by the McNulty Memorandum.
In his interview published in Metropolitan Corporate
Counsel, Mr. Greco urges immediate enactment of the
Specter bill:
While the McNulty Memorandum concedes
that a serious problem has resulted from DOJ’s
waiver policy—a growing cancer spreading in
the justice system—it offers only a band-aid
solution when drastic surgery is needed. The
Specter bill provides the surgical solution and
that is why it should be enacted without delay by
the new Congress. Unless checked now, denial
of the privilege’s protection today to some will
lead to its denial tomorrow for all Americans.
Understanding the Debate over the McNulty
Memorandum “Fix”: Adding Layers to Strengthen an
Internal Process While Preserving Waiver
The McNulty Memorandum’s guidance “revises”
or “clarifies” the Thompson Memorandum in only
two key areas. First, it establishes new procedures
for prosecutors to follow when requesting that a
company waive its attorney-client privilege or work
product protections. Second, it instructs that, except
in “extremely rare cases,” prosecutors “generally
should not take into account whether a corporation is
advancing attorneys’ fees to employees or agents under
investigation or indictment” to assess cooperativeness.
Neither of these revisions will likely produce any
meaningful change.
The “New” Process for Seeking a Waiver
and Assessing Cooperation
The McNulty Memorandum sets out a threshold
“legitimate need” standard for seeking a waiver and then
divides attorney-client privileged communications and
materials protected by the work product doctrine into
two categories: (i) factual work product (which includes
interview notes, summaries and chronologies) and legal
advice when the corporation or an employee is relying
upon an advice-of-counsel defense or legal advice that
falls within the crime-fraud exception (“Category I”);
and (ii) attorney-client privileged communications and
opinion work product, including legal advice given to
the corporation before, during, and after the conduct
being investigated (“Category II”).
To establish a “legitimate need,” prosecutors must
balance the “important policy considerations
underlying the attorney-client privilege and work
product doctrine and the law enforcement needs of
the government’s investigation.” As articulated in the
McNulty Memorandum, “legitimate need” depends
upon: (i) the likelihood and degree to which the
privileged information will benefit the government’s
investigation; (ii) whether the information sought
can be obtained in a timely and complete fashion by
using alternative means that do not require waiver;
(iii) the completeness of the voluntary disclosure
already provided; and (iv) the collateral consequences
to a corporation of a waiver. If a “legitimate need”
exists, prosecutors are instructed to seek the least
intrusive waiver necessary to conduct a complete and
thorough investigation, and follow the step-by-step
approach outlined in the McNulty Memorandum.
With regard to the first step in this process, a waiver
request for Category I information, prosecutors must
obtain written authorization from the United States
Attorney, who in turn must “consult” with the Assistant
Attorney General for the Criminal Division before
granting or denying the request. Though the McNulty
Memorandum cautions that prosecutors should seek
a waiver for Category II information only in “rare
circumstances,” it appears that they are authorized to
take this next step in the process “if the purely factual
[Category I] information provides an incomplete basis
to conduct a complete and thorough investigation….”
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White Collar Crime/Criminal Defense Briefing
Before requesting Category II information from a
corporation, the United States Attorney must obtain
written authorization from the Deputy Attorney
General.
Both Category I and Category II waiver requests must
set forth the factors constituting “legitimate need” and
identify the scope of the waiver sought. Further, any
authorized request—whether Category I or II—must
be communicated by the United States Attorney to the
corporation in writing.
Notably, the government may consider a corporation’s
response to a request for waiver of privilege of Category
I information when making charging decisions.
The McNulty Memorandum specifically states that
prosecutors must not consider a corporation’s refusal to
waive protections afforded to Category II information
when making a charging decision; however, prosecutors
“may always favorably consider a corporation’s
acquiescence to the government’s waiver request in
determining whether a corporation has cooperated with
the government’s investigation.”
Advancing Attorneys’ Fees to Employees
and Assessing Cooperation
The McNulty Memorandum appears to depart from
the Thompson Memorandum policy regarding an
investigated company’s payment of employees’
legal fees. The McNulty Memorandum states that
prosecutors “generally should not take into account
whether a corporation is advancing attorneys’ fees to
employees or agents under investigation or indictment”
to assess cooperativeness, and instructs that they must
not consider a corporation’s compliance with state
law or contractual obligations in this regard a failure
to cooperate.
However, the policy also states that “the advancement
of attorneys’ fees may be taken into account when the
totality of the circumstances show that it was intended
to impede a criminal investigation.” The McNulty
Memorandum cites a Department appellate brief8 for
the model by which prosecutors should gauge the
“totality of the circumstances” to determine whether
there was any intent on the part of the corporation
to impede the government’s criminal investigation.
Prosecutors must follow the Category II authorization
8 The brief was filed in United States v. Smith and Watson,
No. 06-3999-cr (2d Cir. Nov. 6, 2006).
process before they may consider this factor in charging
decisions.
The McNulty Memorandum Is Not the Solution:
A Question and Answer Session with Former U.S.
Attorney General Dick Thornburgh and Immediate Past
ABA President Michael S. Greco
Unlike the legislation proposed by Senator Specter,
the McNulty Memorandum does not prohibit federal
prosecutors from requesting or demanding a waiver,
does not remove a corporation’s refusal to waive the
privilege from a prosecutor’s “cooperation analysis,”
and does not call for the complete removal of
compliance with a waiver request from a prosecutor’s
consideration when making a charging decision—
and, in addition, does not prohibit consideration of
advancement of attorneys’ fees to employees. Without
establishing any external oversight, enforcement
mechanism, or clear standards for approval of a
waiver request, the McNulty Memorandum simply
introduces a process by which prosecutors get to decide
for themselves whether or not a “legitimate need”
exists and, if so, then submit waiver requests to either
the Deputy Attorney General or the Assistant Attorney
General for the Criminal Division—depending on
the nature of the waiver sought. In essence, the
Thompson Memorandum policy continues unabated
in the McNulty Memorandum, notwithstanding Mr.
McNulty’s proclaimed “revision” of the process by
which it is implemented.
Though time will tell whether or not the number of
waiver requests will decrease, one thing is certain:
Under the McNulty Memorandum, unless terminated
by the new Congress, the policy of requesting waivers
of the attorney-client privilege and work product
doctrine protections will not only continue, it will be
enshrined in federal law through the revised process,
with investigated employees, corporations, and their
counsel continuing to be coerced into giving up their
constitutional and legal rights.
Q. What are your initial reactions to the McNulty
Memorandum?
Mr. Thornburgh: Although the McNulty Memorandum
seeks to address those areas of the Thompson
Memorandum generating the foremost concerns, it
simply does not go far enough. This is particularly true
in the determination of a corporation’s cooperation.
While the McNulty Memorandum instructs that a
January 2007 | 5
White Collar Crime/Criminal Defense Briefing
prosecutor may not consider a corporation’s refusal to
waive its privilege with respect to requests for Category
II information, refusals to waive the privilege with
respect to requests for Category I information can still
be considered. Nor does the McNulty Memorandum
make clear the weight that the government will assign
to a corporation’s refusal. Further, the memorandum
provides no guidance on how the scope of requested
waivers will be determined for either category of
information, or how the scope of a waiver plays into
the government’s calculation of cooperation. This lack
of guidance may indeed perpetuate the “culture of
waiver” that existed under the Thompson Memorandum
in which corporations are still induced to waive their
privilege even though the language of the guidelines
does not explicitly require it.
Moreover, the consequences of a waiver go beyond
a corporation’s relations with employees and the
government, a critical factor that the Department
appears to have ignored. Agreeing to a waiver can
increase exposure for a company when privileged
material falls into the hands of the plaintiffs’ bar
in civil cases. When the information is the product
of an internal investigation by the corporation, that
information literally provides a “road map” for a third
party in its claim against the corporation. Plaintiffs’
lawyers, working on contingency, seek the path of
minimum effort. What easier way to frame a complaint
than to tap the company’s own internal investigation?
Without meaningful distinctions in determining
the scope of a waiver, corporations risk significant
exposure to third party suits.
Mr. Greco: The significance of the McNulty
Memorandum is not that it fixes the problem, but that
DOJ has finally admitted that it has created a dangerous
problem needing to be fixed. Unfortunately, the DOJ
policy as set forth in the McNulty Memorandum is
not “new”—it continues virtually all of the corrosive
Thompson Memorandum policy provisions. While the
statements of Deputy Attorney General Paul McNulty
are welcome, the announced new procedures for
administering the waiver policy fall far short of what
must be done to prevent harm to the attorney-client
privilege and to prevent further abuse of constitutional
and legal rights of persons investigated. The policy
continues to provide little protection for facts
gathered by a corporation’s counsel. And, although
the McNulty Memorandum makes it slightly harder
for line prosecutors to obtain waivers to get “core”
attorney-client and work product materials, such as
notes reflecting attorney impressions, conclusions
and advice, a prosecutor merely needs approval of
a higher-up in the DOJ. Thus, the McNulty Memo
merely moves the authority to review a decision to seek
waiver to a higher level within the Department, but still
allows prosecutors to coerce corporate defendants into
waiving the privilege and work product protections.
Q. Do you believe the McNulty Memorandum is an
attempt to derail Senator Arlen Specter’s AttorneyClient Privilege Protection Act of 2006? If so, will it
succeed?
Mr. Thornburgh: The timing of the McNulty
Memorandum clearly indicates this to be the case.
Senator Specter’s proposed legislation addresses the
problem head on and explicitly prohibits efforts to
compel a waiver of the attorney-client privilege and
work product doctrine protections.
Mr. Greco: If the McNulty Memorandum was designed
to create in Congress comfort with DOJ’s new pledge
that waivers will be requested (coerced) less frequently,
Congress should not allow itself to be lulled into this
false sense of security. The critical issue is whether
Congress will allow DOJ to continue to exercise this
immense coercive power, which is what the McNulty
Memorandum accomplishes. Indeed, accepting DOJ’s
new “trust us” pledge should sound uncomfortably
familiar. When the Thompson Memo was issued,
DOJ assured everyone that prosecutors’ judgment on
seeking privilege waivers could be trusted because
they would only seek waiver in rare instances. That
did not turn out to be true. Having the decision now
rest on the judgment of one ultimate decision-maker in
the DOJ may provide less frequent and more uniform
application of the policy, but it leaves in place a waiver
policy that now is almost universally scorned and that
must be eliminated. Given the extraordinary opposition
to the waiver policy by a remarkably broad coalition of
U.S. organizations, and its condemnation by respected
former U.S. Attorneys General, Solicitors General and
other former Justice Department leaders, Congress
should act with dispatch to eradicate the ill-conceived
“culture of waiver.”
January 2007 | 6
White Collar Crime/Criminal Defense Briefing
Q. Do you believe the McNult y Memorandum
will curb Justice Department requests to waive the
attorney-client privilege and work product doctrine
protections?
Mr. Thornburgh: While complicating the process
whereby prosecutors can request waivers, it fails to
address the central problem of permitting the coercive
waiver of these important protections in the first
place.
Mr. Greco: It may reduce the number of requests, but
that is not the point, or the solution. While the McNulty
procedures may lessen the frequency by which
DOJ lawyers request privilege waivers, which had
become routine under the Thompson Memorandum,
a less frequent violation of these crucial rights—
like a decrease in the incidence of torturing alleged
criminals—is unacceptable. The McNulty procedures
effectively preserve DOJ’s power to coerce these
waivers—exactly the power that DOJ must abandon,
preferably voluntarily, but by Congressional action if
necessary.
Q. Does the McNulty Memorandum provide any
genuine relief to the pressures put on investigated
employees and corporate counsel arising out of the
Thompson Memorandum?
Mr. Thornburgh: No. Any relief is negligible. The
policy continues to provide little protection for facts
gathered by a corporation’s counsel. The McNulty
Memorandum makes it only slightly harder for line
prosecutors to obtain waivers to get “core” attorneyclient and work product materials—such as notes
reflecting attorney impressions, conclusions and
advice—as a prosecutor merely needs approval of a
higher-up in DOJ, but the McNulty Memo still allows
prosecutors to coerce corporate defendants into waiving
the privilege and work product protections so long as
he or she obtains the necessary approval. Nor does the
“new” policy adequately protect employees’ rights.
Although the policy states that only in “extremely
rare” cases will the advancement of attorneys’ fees
to an employee be considered a failure to cooperate,
prosecutors are allowed to force companies to take
punitive actions against employees even before any
guilt has been established, in return for cooperation
credit.
Mr. Greco: The simple fact is that for two centuries,
prosecutors fulfilled their duties effectively without
violating constitutional rights. The Department has
not explained, to Congress or otherwise, why it must
ignore this history and exercise this new power. Why
is it not now possible for prosecutors to perform their
duties without violating bedrock principles such as the
attorney-client privilege and work product doctrine,
without denying due process, and without violating
constitutional and legal rights of American citizens?
Prior to the Thompson and McNulty Memoranda,
the burden was on the government to prove guilt
without the aid of coerced waiver of the attorney-client
privilege, without disregard of the Fifth Amendment.
Elimination of the waiver policy will restore this
crucial principle.
Moreover, the roles of both outside and inside counsel
have been dangerously inhibited and marginalized by
DOJ’s policy of coerced waivers. Clients may now
withhold information from counsel and not maintain
records (whether inculpatory or exculpatory) for
fear that information may have to be turned over to
the prosecutor. Counsel will no longer be given all
the information needed to provide informed legal
representation. Counsel retained to conduct an internal
investigation is placed in an ethical dilemma if instructed
not to inform employees who are interviewed that the
information provided and statements made (including
incriminatory) may be turned over to prosecutors, in
violation of an employee’s legal rights. The process
thus has a chilling effect on executives who need the
advice of fully informed counsel, prevents lawyers
from doing what is ethically required of counsel, and
violates the rights of unsuspecting employees. The real
solution is immediate revocation of the waiver policy,
as the U.S. Sentencing Commission has done.
Q. Isn’t the threshold “legitimate need” test a selffulfilling prophecy that any federal prosecutor will be
able to easily overcome? What weight, if any, must
be afforded to the policies underlying the attorneyclient privilege and the work product doctrine in
performing the balancing test? What, if anything,
does the “legitimate need” test add to the process?
Mr. Thornburgh: Although the “legitimate need”
language in the McNulty Memo appears to be a step
in the right direction, it is actually a Trojan horse. In
sum, the Memo infringes on a constitutional right and
empowers the Department of Justice to sua sponte
determine whether there is a legitimate need for such
infringement. Our constitution does not work in such
a fashion. Moreover, it empowers one branch of the
January 2007 | 7
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government, the Executive Branch, to violate these
principles without any checks and balances by any
other branch. The “legitimate need” will solely be
determined by Justice—and because it will do so under
a policy memorandum, Justice can do so without any
review by the courts or any necessary demonstrative or
challengeable factors to prove out that need. Thus, what
occurs is that Justice, based only on the facts provided
to them by an Assistant United States Attorney and/or
the United States Attorney will determine whether
there is legitimate need. There is no opportunity for
defense counsel to weigh-in and explain the facts
and/or circumstances to counter the legitimate need
determination. As a result, this threshold test is likely
meaningless.
Mr. Greco: Given the Department’s track record since
issuance of the Thompson Memorandum and the
culture of waiver that the Department appears to value
and encourage, as well as the McNulty Memorandum’s
continuation of those policies and culture, the promise
held out by use of the term “legitimate need” appears
to ring hollow.
Q. What do you believe it means for a U.S. Attorney
to “consult” with the Assistant Attorney General for
the Criminal Division when seeking a Category I
waiver? How do you anticipate U.S. Attorneys will
evaluate a request for a Category I waiver in order to
determine whether it should be granted or denied? Do
you envision an “all or nothing” scenario or will U.S.
Attorneys grant a modified request?
Mr. Thornburgh: For Category I waivers, that being
factual work product, the McNulty Memo vests
authority and discretion with the United States Attorney
as it existed in the Thompson Memo. There is language
that requires a consultation with the Assistant Attorney
General for the Criminal Division. It appears that
consultation language is designed to attempt to ensure
that Category I waivers are somewhat standardized
throughout the country without removing the discretion
from the United States Attorney. One problem that
is foreseeable is how broadly the “work product
doctrine” will be defined by United States Attorneys
in order to put certain information into Category I,
so that it can be decided at the local level. What may
result is Category I consuming Category II, and the
United States Attorneys using their authority from the
McNulty Memo as a club in order to obtain waivers
for corporations. Again, with no opportunity for review
or independent oversight, corporate counsel is very
limited in their ability to respond to such tactics.
Mr. Greco: For the reasons expressed above, I am
skeptical of any meaningful change in DOJ’s waiver
policy. For the same reason that the Founders separated
the executive and judicial powers in our government,
the Department should not be given the power both
to execute and judge its own conduct. The time has
come for DOJ to revoke its harmful policy instead of
continuing to put band-aids on it.
Q. How do you see the Department of Justice
complying with the guidance in responding to a
company’s decision not to waive protections afforded
to Category II material? Such a refusal to waive cannot
be considered in charging decisions but an agreement
to waive may be viewed favorably in determining
whether the company has cooperated. Can the two
be easily separated?
Mr. Thornburgh: I think the McNulty Memo’s
position on a company’s refusal to waive and a separate
company’s agreement to waive is fatally flawed. What
the Department has implemented here is an inconsistent
policy. A company that chooses not to waive its rights
will, by definition, suffer if companies that do choose
to waive those rights receive a charging or a plea
benefit. In sum, it appears to be a public relations ploy
to address the outcry that was heard when corporations
were assisting their employees with the costs of
defense counsel and thereby maintaining the attorneyclient privilege and work product doctrine protections.
Because the McNulty Memo distinguishes between
companies that waive or refuse to provide counsel fees
from those that do not waive their protections and that
do provide counsel and advance fees, this “change”
from the Thompson Memo is meaningless.
Mr. Greco: I agree with Attorney General Thornburgh’s
analysis. So long as prosecutors are enabled and
encouraged to seek waiver of the privilege, and
“reward” companies that “voluntarily” choose to
waive it, the reality will be continued pressure on those
companies that resist waiver. As can be said of virtually
all aspects of the McNulty Memorandum, relief from
the corrosive Thompson Memo policies that seems
to be promised is illusory. There is no meaningful
relief contained in the McNulty Memo, the Memo
appears intended merely to mollify Congressional
members who will consider the Specter legislation,
and the harms discussed earlier will continue unless
January 2007 | 8
White Collar Crime/Criminal Defense Briefing
the new Congress acts expeditiously to rein in DOJ’s
overzealousness.
K&L Gates’ White Collar Crime/Criminal Defense
Practice
K&L Gates lawyers routinely handle a variety of
high visibility state and federal investigations, grand
jury proceedings, and criminal trials on behalf of
corporations and individuals. We have also conducted
complex internal investigations, represented clients in
Congressional investigations, and provided compliance
advice to corporations. We have lawyers experienced in
all such matters located throughout the firm, including
former federal and state prosecutors and a former
United States Attorney General. The touchstone of our
effort is to be aggressively proactive in implementing
strategies to prevent criminal charges from being filed
or, failing that, to fight vigorously any charges that may
be brought against our clients.
Contacts:
Boston
Michael Ricciuti
617.951.9094
michael.ricciuti@klgates.com
Los Angeles
Richard Crane
310.552.5089
richard.crane@klgates.com
Newark
David S. Kwon
973.848.4025
david.kwon@klgates.com
New York
Walter Loughlin
212.536.4065
walter.loughlin@klgates.com
Pittsburgh
Mark Rush
412.355.8333
mark.rush@klgates.com
San Francisco
Jeff Bornstein
415.249.1059
jeffrey.bornstein@klgates.com
Washington
Dick Thornburgh
202.778.9080
dick.thornburgh@klgates.com
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January 2007 | 9